Debt Free!

Last week, we made our last payment of $6,400 to complete our last student debt payment. We started our journey toward financial freedom last December (2015) when we set a goal to eliminate the $97k we had in debt. The $97k consisted of three student loans ($50k, $20k and $7k) and two car loans ($13k and $7k).

Debt Payments: Loan Amount Interest Rate Payment
Car 1                         6,841.00 2.90%                            385.65
Car 2                       12,940.84 4.19%                            364.73
Ford Federal Student Loan                       51,000.00 6.8%                            500.00
MN State Student Loan                       19,900.00 3.20%                            200.00
Katie Student Loan                         6,800.00 6.75%                            200.00
Total                       $97,481.84                          $1,650.38

Two of my recent posts discuss some of the strategies we used to eliminate this debt. The first post reviews the five steps, from a high level, I recommend after going through this journey:

Step 1:  You need to start tracking where ALL of your money goes

Step 2: Create a budget and develop a plan to find ways to save money

Step 3: Build an emergency fund

Step 4: Develop a plan (e.g. Debt Snowball) and apply extra savings toward debt

Step 5: Begin investing for the future

The second post focuses on Step 1 and Step 2, which were vital for us eliminating our debt. It is pretty simple actually: track where you spend your money, and if you do not like where your money is going adjust your budget accordingly (or create a budget in the first place if you have not done that). We already had an emergency fund, and we created a debt snowball plan to accelerate knocking out debt.

What does getting out of debt really mean for us?

Eliminating our debt is a huge relief. There were a few things I was worried about before really tackling debt. First, I was worried my car would die before I paid it off because I put a significant amount of miles on my car for work. Second, even though we were putting about $700 a month toward student loans, it was still going to take us over 9 years to pay them off. Last, and most importantly, I was mad! I was mad that I had to commit $1,600/month toward debt.

I understand that I needed the loans to invest in myself for college so that I could get the job I have today. However, I wish I would have known about other avenues available to pursuing an engineering degree. For example, going to community college for my first two years and then transferring to a school that has an engineering program would have saved me some serious ca$h. I am planning on writing more about options high school students have after they graduate on future posts.

Here are some ideas my wife and I are contemplating with the extra $1,600/month we have:

  1. Keep our emergency fund where it is at because our emergency fund can cover an additional two months of expenses.
  2. Invest more money.
  3. Set money aside each year for a vacation.
  4. Bolster our savings for a down payment on a house or maybe a cabin 🙂
  5. Start a 529 for our little one that could be on its way any day!

What have you done with the extra money you had after eliminating debt? If you haven’t quite eliminated all of your debt, what do you plan on doing?